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  • Writer's pictureMax Austin

Over 180,000 low earners caught by HMRC fines

Updated: Mar 21

HMRC fined more than 180,000 low earners for not filing their self-assessment returns on time, despite many not even earning enough to pay tax , according to thinktank Tax Policy Associates

Max Austin, Reporter, Accountancy Daily


In 2020-21, HMRC dished out fines to 184,000 people paid less than £12,500 annually - which is below the income tax threshold - for failing to complete a self-assessment tax return on time.


The analysis, by the independent think tank Tax Policy Associates, found that many low-earners experiencing financial hardship often ‘misunderstood’ the initial fine and were sent further penalties, as result – landing them in thousands of pounds worth of debt.


In total, around 92,000 among the lowest-paid 10% of the UK population were handed heft fines by HMRC for late filing in 2020-21. By comparison, just 39,000 of the highest-paid 10% received fines in the same year.


Highlighting the seriousness of this, Dan Neidle, founder of TPA, said: ‘Something’s gone badly wrong when 40% of HMRC’s late filing penalties are issued to people who earn too little to pay tax. The law needs to change.’


This follows as HMRC announced this month that the phone lines for taxpayers with self-assessment problems will be closed for three months.


Between 12 June and 4 September 2023, all calls to the helpline will be redirected to HMRC’s website to give the tax authority time to deal with more ‘urgent’ phone enquiries.


HMRC said the move would free up 350 advisers to taken calls on other lines and answer taxpayer correspondence.


Earlier this month, MPs from the Treasury Committee asked HMRC about the impact the closure might have on taxpayers, and whether it could be putting up an unnecessary barrier to people wanting to get their taxes right.


They also criticised the short notice of the closure with HMRC giving taxpayers only two working days to react to the decision with the announcement made on 8 June, days before the service went offline.


By missing the deadline, a £100 automatic late-filing penalty is applied. Three months past the deadline, the penalty can start increasing by £10 each day. After six months, a flat £300 penalty can be applied.


An HMRC spokesperson said: ‘The government has recognised that taxpayers who occasionally miss the filing deadline should not face financial penalties and has already announced reform of the system.


‘Deadlines for returns are necessary for the efficient functioning of the tax system, though, and we strongly encourage anyone who does not need to file a return to tell HMRC.


‘Our aim is to support all taxpayers, regardless of income, to get their tax right, and details of what to do if a person no longer needs to file a return are included in reminder letters every year.’




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